Nimett & Estate of Nimett (deceased)
[2007] FamCA 1189
•25 September 2007
FAMILY COURT OF AUSTRALIA
| NIMETT & ESTATE OF NIMETT (DECEASED) | [2007] FamCA 1189 |
| FAMILY LAW – PROPERTY SETTLEMENT – deceased husband – husband’s Will left his estate to two children [16 and 15] in equal shares upon attaining the age of 25 years - major asset rural property gifted to husband by his parents during the marriage – rural business operated in partnership by husband and wife until his death and operated in partnership by wife and executors after husband’s death – conflict and deterioration in relationship between wife and executors - interim orders gave wife virtual control of the operation of the property pending final hearing – final orders sought by executors for subdivision and/or sale of rural property – final orders sought by wife to hold the children’s share in trust until they attain the age of 25 years – disputes about alleged debts to husband’s parents – capital growth in value of property since gift to husband - consideration of 75(2) factors where one spouse deceased – consideration of requirements of s 79(8) – discussion of s 79(1), limitations of power, and considerations relevant to an order settling property on children pursuant to s 79 – order made settling portion of the estate’s entitlement on the children with their mother as trustee upon the same terms established by the Will |
| Family Law Act 1975 (Cth) |
| Allan and Allan (1987) FLC 91-824 |
| APPLICANT: | Mrs Nimett |
| RESPONDENTS: | Mr and Mrs Wylder as Trustees of the Estate of the late Mr Nimett |
| FILE NUMBER: | NCF | 600 | of | 2004 |
| DATE DELIVERED: | 25 September 2007 |
| PLACE DELIVERED: | Sydney |
| PLACE HEARD: | Sydney |
| JUDGMENT OF: | Moore J |
| HEARING DATE: | 30, 31 July & 1 August 2007 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Gould |
| SOLICITOR FOR THE APPLICANT: | Bruce Macdonald Lawyers |
| COUNSEL FOR THE RESPONDENTS: | Mr Thistleton |
| SOLICITOR FOR THE RESPONDENTS: | Marsdens Law Group |
Orders
Pursuant to s 79 of the Family Law Act 1975 on or before one (1) month from the date of these orders the respondent executors are to do all things and sign all documents necessary to
(a)transfer to the wife as a tenant in common 32.5% of the property known as O property;
(b)transfer to the wife as trustee for each of the children A and B 33.75% of the property known as O property as tenants in common to be held by her for each of the beneficiaries upon the same trusts created by the Will of their father, the late Mr Nimett;
(c)transfer to the wife the livestock, plant and equipment owned by the partnership formerly conducted by the wife and her late husband;
(d)assign to the wife the whole of the interest in the B Credit Union account held as an asset of the partnership formerly conducted by the wife and her late husband.
Pursuant to s 79 of the Family Law Act 1975 on or before one (1) month from the date of these orders, the applicant wife is to do all things and sign all documents necessary to assign to the Estate of the late Mr Nimett the whole of the B Credit Union account held jointly by her with her late husband.
Unless otherwise specifically referred to in orders 1 and 2 hereof –
(a)the estate is entitled to retain to the exclusion of the wife the assets currently owned by the estate including shares, sale proceeds of a motorbike and B Credit Union account and be responsible for payment of taxation liability incurred by the late husband and/or estate;
(b)the wife is entitled to retain to the exclusion of the estate the assets currently owned by the wife including deposits in financial institutions, shares, horses, gear and float and other chattels located on O property and her superannuation and be responsible for payment of taxation liability incurred by her.
If either party refuses or neglects to execute any deed, instrument or writing necessary to give effect to these orders, the Registrar or a Deputy Registrar of the Family Court of Australia Sydney Registry is appointed pursuant to s 106A of the Family Law Act 1975 to execute it in the name of that party and to do all other necessary acts and things to give validity and operation to the deed, instrument or writing.
IT IS NOTED that publication of this judgment under the pseudonym Nimett & Estate of Nimett (deceased) is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
| FAMILY COURT OF AUSTRALIA AT SYDNEY |
FILE NUMBER: NCF600 of 2004
| Mrs Nimett |
Applicant
And
| Mr and Mrs Wylder as Trustees of Estate of the Late Mr Nimett |
Respondents
REASONS FOR JUDGMENT
Proceedings
This is the determination of proceedings for property settlement pursuant to s 79 Family Law Act 1975 (Cth). The parties are the wife and the executors of her late husband’s estate, Mr and Mrs Wylder.
The wife and the executors had each filed applications related to payment of child support but before the close of the case it was accepted this court has no jurisdiction to make such orders in the circumstances presented and those claims were withdrawn.
Brief background
The wife (47) and the husband married in April 1989. Their son, A (16), was born in March 1991 and their daughter, G (15), was born in June 1992. The family lived on a property known as O property which was used by the husband and the wife in partnership for a rural business. They separated in June 2004 when the wife left O property in circumstances she relates.
On 10 December 2004 she instituted proceedings for parenting orders and property settlement. Mediation followed and in due course it was agreed the children would live with each parent week about. This was reflected in consent orders made on 24 February 2005. At the time both children were attending private schools in the O area.
In mid-May 2005 the husband was hospitalised and his wife, at his request, returned to O property to see to the children and to the running of the property in his absence. However, his illness was critical and he passed away at the end of May 2005. The wife and the children have remained living at O property.
By his Will dated 9 November 2004 the husband appointed friends, Mr and Mrs Wylder, as executors and trustees. After a small bequest to the executors, the residue of the estate was left in equal shares to his children, A and G, as survive him and attain the age of 25 years, with the proviso that if either child predeceases him or survives him but dies before attaining the age at which their interest would vest leaving a child or children, then that child or children would take, in equal shares, at the age of 25 years the share of the parent. There was further provision that if neither child survives him leaving a child or children then the whole of his estate would go to his nephew [named] absolutely. Finally, there is a specific direction that s 14A(2), s 14A(4) and s 14C of the Trustee Act shall not apply to any trusts created by the Will. Examination of those sections reveals they relate to duties of a trustee with respect to the power of investment and matters to which the trustee is to have regard when exercising that power. For convenience, those provisions of the Trustee Act are set out in Schedule A to these reasons. Having excluded those provisions, the trustees were granted additional other powers and discretions set out in the Schedule to the Will. They are various but some are distinctly contrary to the duties imposed by the excluded provisions of the Trustee Act just mentioned. Without being exhaustive, the specific powers and discretions granted include [my emphasis]:
‘1. In respect of the contingent or presumptive share of any beneficiary taking under this my Will to pay not only the income but also the whole or any part of the corpus of such share for or towards the education maintenance or advancement in life of such beneficiary and the Trustee may so apply the same or pay the same to the person or persons for the time being having the custody or control of such beneficiary without being responsible to see to the application or being liable for the misapplication thereof.
2. To invest my Estate or any part of it and to vary or transpose the investments as if the Trustee was the beneficial owner and in the absolute discretion of the Trustee AND I DECLARE that without limiting its generality this power extends to investment in property and other assets which do not produce income including unsecured interest-free loans to any beneficiary and property to provide a place of residence for the occupation of any beneficiary.
3. To retain as an authorised investment in my Estate any assets held by me at the date of my death notwithstanding the asset may be of a wasting, hazardous or reversionary nature or may consist of shares in a limited liability company either with or without liability for uncalled capital.’
At times during their evidence, the executors, particularly Mrs Wylder, conveyed the impression that in discharging their duties they had been motivated more by a theoretical, general understanding of trustees/executors responsibilities than by the particular terms specified by the testator, including the exclusion of specified provisions of the Trustee Act as well as the grant of specific additional powers contrary to those excluded provisions.
In any event, the executors were substituted for the husband as a party to these proceedings in due course. The wife has conducted the operations at O property against a background of a downward spiral in relations between her and the executors.
Orders sought
The assets and liabilities to be distributed will be set out later. The most valuable and significant asset is the O property which is the subject of evidence given by two single experts. Mr K valued it at $3.5 million and his figure is agreed. At an earlier time both parties proposed subdivision of the O property and Mr H was asked to consider those proposals. He evaluated each proposal by identifying shortcomings and advantages though in his opinion the property’s ‘highest and best configuration’ is as an ‘englobo unit as it is currently configured’ which provides the ‘most sustainable rural unit in terms of economic and environmental considerations’. He went on to express a preference for a ‘modified [executors] subdivision’ if subdivision were to occur and he gave his reasons at 9.0 of his report. Mr K valued the separate Lots created by both proposals and he also valued plant and equipment. Those figures are also agreed.
The wife’s counsel opened her case with an alteration to her position set out in an earlier amended application where she had sought transfer to her of the O property as to 65% [in part representing lump sum child maintenance] as tenant-in-common with the remaining 35% to be held by her in trust for the children, or alternatively by the executors, under the trust created by the Will; she would retain the stock and plant and machinery along with other assets she holds; there would be an equal distribution between her and the estate of the Y Investment; and the estate would take certain assets currently held. She and the estate would each pay their own tax debts. She had by then discarded any proposal for subdivision. There was an alteration to her position by the time the case closed when her counsel tendered a Minute of orders sought [exhibit 9], the more central being a shift from the 65/35 division of the O property to 70/30 in her favour. For convenience the particulars are set out in a Schedule B.
The executors’ position has also changed over time and a Minute of orders tendered at the outset of the hearing [exhibit 3] reflects the orders they now seek. That involves a subdivision of the O property by the creation of Lot 3 and Lot 4, the sale of Lot 3 [valued at $1 million], distribution of the proceeds of sale to cover certain costs, and pay $690,000 to the wife. The estate would retain Lot 4 which would be offered for lease to the wife on commercial terms and if not taken by her the property would be offered for lease to a third party. There was no identification of the duration of the lease or any other terms essential to a lease arrangement [there was a suggestion of payment of $90,000 per annum may be appropriate] but the executors see the ‘commercial basis’ they propound as dealing with those matters. Their proposal envisages a distribution of no more than 31.5% of net assets to the wife and if she is entitled to more then the subdivision proposal would fall and there would be a sale of the whole property. If sold, they agree the wife may retain the stock, plant and equipment, and machinery used in the working of the property as part of her overall entitlement. Again for convenience, the particulars are set out in Schedule C.
Approach - s 79
The death of the husband and the substitution of the executors brings to the fore the provisions of s 79(8) of the Act. After allowing in paragraph 79(8)(a) for continuation of the proceedings, paragraph 79(8)(b) provides that if the court is of the opinion
(i)that it would have made an order with respect to property if the deceased party had not died; and
(ii)that it is still appropriate to make an order with respect to property;
the court may make such order as it considers appropriate with respect to
(iii)any of the property of the parties to the marriage or either of them; or
(iv)…
The workings of the section did not feature in the submissions and not a lot need be said about it here. Obviously it requires findings to the effect that an order would have been made if the deceased had not died and it is still appropriate to make and order with respect to property. Section 79(8)(b)(i) does not make it necessary to identify with specificity what order would have been made had the deceased not died [See Allan and Allan (1987) FLC 91-824 at p 76,210; Randle and Randle (1987) FLC 91-828 at p 76,230; North and North (1987) FLC ¶91-831 at p 76,248]. As for the time at which that broad assessment is to be made, one view is that the wording of s 79(8)(b)(i) makes it referable to the time of the spouse’s death [see discussion in North (supra) per Gee J.] but there is another view that it is at least arguable that it is referable to the time of hearing [eg Doyle and Doyle (deceased) (1989) FLC 92-027 at p 77,397 per Lindenmayer J.] Whatever view is taken about the timing of the initial assessment, it does not present an obstacle in this case because the very terms of the orders sought by the wife and the executors make it plain there is no contest about the necessary findings and the matter proceeds from that footing.
The conferral of the discretion to make such order as the court considers appropriate is governed by the earlier sub-sections of s 79. Of some relevance here is s 79(1) which is often overshadowed by those that follow and nor did it feature in the submissions. The relevant provisions are:
(1)In property settlement proceedings, the court may make such order as it considers appropriate:
(a)in the case of proceedings with respect to the property of the parties to the marriage or either of them - altering the interests of the parties to the marriage in the property; or
(b) ….
including:
(c)an order for a settlement of property in substitution for any interest in the property; and
(d) an order requiring:
(i) either or both of the parties to the marriage; or
(ii) …
to make, for the benefit of either or both of the parties to the marriage or a child of the marriage, such settlement or transfer of property as the court determines.[my emphasis]
As noted, s 79(1) makes express provision for settling property on a child of the marriage. While there is no similar express provision in s 79(8), s 79(1A) [which provides for the enforcement of an order under s 79(1) by or against the estate of a deceased party] makes it clear that when proceedings fall under s 79(8) the power to settle property on a child of the marriage is retained [see also Gilbert v Estate of Gilbert(1990) FLC 92-125 at 77,833]. It will be necessary to return to discuss this head of power later, given the wife’s primary application.
Sub-section 79(2) provides that the court shall not make an order under the section unless it is satisfied, in all the circumstances, it is just and equitable to make the order. Then ss 79(4) sets out matters to be taken into account in considering what order (if any) should be made under the section:
‘(a)the financial contribution made directly or indirectly by or on behalf of a party to the marriage or a child of the marriage to the acquisition, conservation or improvement of any of the property of the parties to the marriage or either of them, or otherwise in relation to any of that last mentioned property, whether or not that last mentioned property has, since the making of the contribution, ceased to be the property of the parties to the marriage or either of them; and
(b)the contribution (other than a financial contribution) made directly or indirectly by or on behalf of a party to the marriage or a child of the marriage to the acquisition, conservation or improvement of any of the property of the parties to the marriage or either of them, or otherwise in relation to any of that last‑mentioned property, whether or not that last‑mentioned property has, since the making of the contribution, ceased to be the property of the parties to the marriage or either of them; and
(c)the contribution made by a party to the marriage to the welfare of the family constituted by the parties to the marriage and any children of the marriage, including any contribution made in the capacity of homemaker or parent; and
(d)the effect of any proposed order upon the earning capacity of either party to the marriage; and
(e)the matters referred to in subsection 75(2) so far as they are relevant; and
(f)any other order made under this Act affecting a party to the marriage or a child of the marriage; and
(g)any child support under the Child Support (Assessment) Act 1989 that a party to the marriage has provided, is to provide, or might be liable to provide in the future, for a child of the marriage.’
The approach to these provisions is well established [eg Hickey and Hickey & Attorney-General for the Commonwealth of Australia (2003) FLC 93-143]. There is first determined the nature and value of the parties’ property; contributions as defined in s 79(4)(a)-(c) are then evaluated; consideration is given to the effect of an order on earning capacity; consideration is then given to any adjustment to earlier evaluation by reason of any relevant factors set out in s 75(2); and this is followed by consideration of the effect of any other orders and payment of child support, past and future. Finally, there is an obligation to review the outcome against the just and equitable requirement imposed by ss 79(2).
To the extent it might be of some relevance here, s 43 sets out principles to be applied by courts in the exercise of jurisdiction under the Act by having regard to a number of matters, including
‘(b)the need to give the widest possible protection and assistance to the family as the natural and fundamental group unit of society, particularly while it is responsible for the care and education of dependent children;
(c)the need to protect the rights of children and to promote their welfare;…’
Evidence
Mention has been made already of the evidence of the expert valuers. Apart from her own evidence, the wife relied on evidence from a number of witnesses. None were required for cross-examination and so their affidavit evidence can be accepted and taken into account in later assessments. In brief:
(a)The evidence of Dr L, veterinary surgeon, relates to her experience of the wife in the management of the O property after the death of her husband, including steps she took to control parasites, and is complimentary of the wife’s management of animal health.
(b)Dr B is another veterinary surgeon who has known the wife longer and has made numerous visits to the O property since 2001. She has observed the wife in the day to day running of the property.
(c)Mr C is a farmer of 30 years standing who has known the wife since earlier 1990. He has worked with her at branding time, on fencing projects, and he has purchased stock from O property. He is complimentary about her understanding of livestock practices, property maintenance skills and of her economic management and environmentally sustainable practices.
(d)Mr T has been operating a rural business for 26 years and has known the wife for all that time. Since the husband’s death he has helped her on a number of occasions with livestock and machinery. He has found the livestock to be healthy and productive and in better than district average condition.
(e)Mr E is a wool producer of long standing and classed the clip for O property from 2004 to 2006. He has found an overall improvement which he attributes to improved methods of husbandry, parasite control and nutrition as well as culling of older and less productive sheep as introduced by the wife.
(f)Mr W has known the wife for at least 10 years and for the past 4 years he has frequently worked on O property doing branding, animal delivery, and drafting. He speaks positively of the wife’s work capacities on the property.
(g)Mr R has a long background in the rural sector and has been scanning sheep since 1989. He has done so on O property for the past 2 years and he also speaks highly of the wife’s management of the property.
(h)Finally, there is an affidavit from Mr S who is a shearer and has been a shearing contractor for 6 years. He was hired as the contractor by the wife for 2006. His evidence goes to contact he received from the executors, first to discourage him from going ahead with the shearing followed by a letter he annexed to his affidavit telling him, amongst other things, that if he chooses to shear then the wife will be solely liable for his account and no claim on the estate will be able to be made.
As for the case presented by the estate, both executors gave evidence on affidavit and at the hearing. They also relied on affidavits from the husband’s parents, who were cross-examined relatively briefly by telephone. The substance of their evidence related to financial arrangements entered into during the course of the marriage and they will be discussed shortly. There was a further affidavit from Mr Z, an accountant, who gave advice on the tax payable if the estate’s sub-division proposal were adopted. In making his calculating he adopts as the base figure for the value of the O property in 1996 the sum of $1.166 million according to a valuation undertaken at the time. No objection was taken to this part of his evidence and there was no other evidence offered to compete with it. He was not required for cross-examination. Therefore I accept the value of the O property in 1996 to be that figure.
History
What follows is an account of the relevant background as I find it, either because it constitutes common ground or is admitted or is supported by evidence I accept.
The husband had no rural background before the age of 21 years when he started work for his parents on the O property which they had acquired at the time. He was working for his parents when he married some 14 years later. He owned a Commodore motor vehicle. The wife did have a rural background but she also held professional qualifications and was working in her profession. She owned a home at L which she had acquired in 1983, a motor vehicle and 5 cows and calves which were brought to the O property.
After the marriage they occupied the cottage on the property. The husband continued to work for his parents who remained living in the homestead. There were two significant changes over the years to come: the first in 1992 when the husband and wife formed a business partnership and the second four years later in 1996 when the O property was transferred to the husband’s name. I shall return to those events shortly, but the husband’s circumstances throughout until his illness and untimely death in 2005 were that he remained living on the O property and working the property.
As for the wife, after the marriage she worked part time in her profession until A’s birth in March 1991. G was born in June the following year. From the outset she also assisted with work on the property. From 1992 until her husband’s death they conducted the operations on the O property in partnership. She says, and she was not challenged about it, work on the property occupied her pretty much full time once the children went to school. She relates managing the livestock and instigating new management practices, including better sheep parasite control, tagging, devising a quality assurance program for the cattle, introducing shorter joining periods for stock, better handling techniques and weaning for calves, appropriate stud management, and better pasture management including the planting of thousands of trees. In 1999 she returned to her profession part time. Added to this, she says, and again she was not challenged, she was the primary carer of the children and did most of the domestic household chores. After separation when she left the O property in 2004 she continued her profession until she returned a year later when her husband fell ill. She has worked the property since his death in circumstances to be outlined later, but in December 2005 she again returned to her profession part time to supplement her income. That remains her position at the present time.
The first significant change in the shared financial history came about in April 1992. From then, by agreement with the husband’s parents, they operated a partnership on the O property, sharing profits equally. They purchased the livestock on O property at market price for $127,450, interest to be paid at half the current bank rate to be reviewed quarterly. While the plant and machinery remained the property of the husband’s parents, they used it and the O property without cost to them to conduct their business.
There are two disputes about this arrangement: one is whether the whole of the money owing for the stock purchase has been paid and the other is whether there was a further agreement that the husband’s parents would be paid annually a sum of $8,000. The estate asserts not all of the stock money has been paid and that there was an agreement to make the annual payment. This translates to a submission that there ought to be included in the liabilities, and paid to the husband’s parents, $9,371 referable to the unpaid portion of the stock loan and $192,000 referable to the agreed annual payment. The latter comprises $120,000 which is said to be owing over the past 15 years @ $8,000 per annum and $72,000 which is said to represent the next 9 years @ $8,000 per annum, that being the supposed future life expectancy of the husband’s parents. On the other hand, the wife’s case is that the stock debt was paid in full by 2003 through quarterly instalments of $4,250 or $17,000 per annum. As for the annual payment, it is her case there was never any formal agreement. Her position translates to a submission that there are no grounds for including the figures proposed by the estate as debts due and payable to the husband’s parents.
Produced and shown to the wife is a diary note she made in 1992 at the time of the change in arrangements on the O property. Amongst other things, that refers to ‘the deal’ and there is reference there to payment of an annual sum of $8,000 for ‘wages/consultancy fees/drinking money’ to be paid fortnightly. However, she maintains that whatever was discussed at the time, it was never brought to the stage of being a concluded or formal agreement. She also maintains, and it is accepted, she and her husband never made any payment jointly, nor did her husband make any payment during the subsequent 13 years of his lifetime, and nor was there ever any request or demand made by the husband’s parents for payment.
The component said to represent the remaining life expectancy of the husband’s parents can be dismissed as having no footing whatever from the evidence and even exhibit 6 does not support the importation of such a term. In any event, exhibit 6 is not accepted as establishing a concluded agreement. Consistent with the wife’s case, it is more likely the arrangement referred to in her diary was discussed informally but went no further. I say that because at no stage from 1992 until the husband’s death 13 years later was there ever any payment to his parents and nor has there ever been any request or demand for payment. The complete absence of any activity or indicator of an agreement over that long period is supportive of the wife’s position and sufficient to dismiss the contention as unfounded. It follows that the liabilities to be set out later will not include the figures proposed by the estate.
As for the alleged shortfall on repayment of the stock debt, the wife’s evidence that it was repaid in full by 2003 has not been met by any credible evidence to the contrary, including from the husband’s parents, and the record of payments does not of itself establish a deficiency. Quite apart from the view taken of the wife’s reliability on the topic, there has been no demand or request for payment of any further money said to be owing since the last payment some years ago and had there been a shortfall it is reasonable to expect it would have been raised much earlier and quite outside the context of these proceedings. Again it follows that the liabilities to be set out later will not include the figure proposed by the estate.
If a contrary view were taken to those findings, it would still not be appropriate to include for present purposes the figures proposed by the estate as current liabilities. That flows from various authorities that recognise there are circumstances where it is proper for liabilities to be disregarded, in whole or part, in calculating the net assets for division under s 79. For example, in Biltoft (1995) FLC 92-614 [Nicholson CJ, Ellis and Buckley JJ] at 82, 124 their Honours discussed the general practice of deducting liabilities, in the course of which they quoted with approval from the judgment of Evatt CJ in Prince (1984) FLC 91-501 at p 79,076, and later at 82, 127 they said:
‘Notwithstanding the general practice which has developed, the Court has indicated that it may properly determine not to take into account or to discount the value of an unsecured liability in certain circumstances. Such liabilities would include but are not limited to a liability which is vague or uncertain, if it is unlikely to be enforced or if it was unreasonably incurred.’
These observations are not an exhaustive list of the category of case where it may be appropriate to disregard a liability. As a later Full Court in J and J [1998] FamCA 163 noted, the exceptions to the general approach relating to liabilities is not closed and the adoption of the general approach is not required as a matter of law though departure will justify close scrutiny at appellate level.
In this case, if the existence of an agreement and consequent debt were proved as alleged, the circumstances would fit within those discussed in Biltoft as being uncertain and unlikely to be enforced and thus properly disregarded in formulating the value of the net assets for distribution. That arises from the complete absence of any activity over the many years it was said to remain owing.
In June 1993 a Toyota Landcruiser was purchased for $33,000. The wife had sold her home at L earlier for $36,000 and she used that money to acquire the vehicle for the partnership. Questions about the trade in of a Holden for over $7,000 and other questions directed to the partnership depreciation schedule did nothing to displace the wife’s evidence on the point which impressed as reliable.
The other significant change occurred in 1996 when the husband’s parents transferred the O property to his sole name for no payment. There is dispute now about the arrangement. It is an important one because it has a significant flow on effect to the later assessment of contributions. There are a number of authorities which discuss the proper approach when the history reveals family gifts, but two key cases only need be mentioned. The first is the decision of Fogarty J in Gosper (1987) FLC 91-818 where his Honour said [commencing 76,168]:
‘Where there has been a gift or advance by a relative to one or both of the parties to the marriage, the first step is to determine the ownership of the benefaction...
….
The next step is to consider the application of s79 to all of the property of the parties, including property received by one or both of them by way of benefaction from a third party.……
Where a gift is made solely to the donor’s relative (for example a gift by parents to their married daughter) and that spouse applies that property to the marriage, that is a direct financial contribution solely by that party and will be assessed in the ordinary way alongside other contributions by each party to the marriage.’His Honour’s review of the authorities at the time was approved by the Full Court in Kessey (1994) FLC 92-495 at 81,149, though on the facts before them in that case their Honours said they would go further than Gosper [at 81,150]:
‘This is because this case would establish that where there is no evidence of any intention by a parent-donor as to whether he or she wished to benefit only his or her child or also to benefit the spouse of the child as well as the child, then the fact of the parent-child relationship, especially in circumstances where that has been a relationship of support on the part of the child, will be sufficient to establish a contribution of the donation by or on behalf of the child of the parent. In other words, a contribution by a parent of a party to a marriage to the property of the marriage will be taken to be a contribution made by or on behalf of the party who is the child of the parent unless there is evidence which establishes it was not the intention of the parent to benefit only his or her child.’
Kessey therefore establishes a rebuttable presumption where the intention of the donor parent assumes centre stage. In some cases that is not available through direct evidence and history has to be reconstructed from whatever is available. Here, it is the wife’s case that the husband’s father had said to her husband and/or to her from time to time from 1989 onwards that the ‘farm will be yours one day’. This was repeated and relayed to her by her husband on occasions and she maintains they together had an expectation it would eventually occur. The reason the O property was ultimately transferred to her husband’s name solely was to do with stamp duty, at least so he told her. On the other hand, there is evidence from the husband’s father of his intention at the time, to the effect that in transferring the property to his son he intended to benefit his son, though he acknowledged this would indirectly benefit his son’s wife and young children. In my assessment his evidence of his intention was not displaced or undermined and can be accepted. It follows that in later assessing contributions the transfer of the O property in 1996 will be a factor weighing in favour of the husband/estate, along with other factors.
After the transfer, the husband’s parents continued for a few years to live on the property in the homestead before moving to town in September 1999 and at that time the husband and his family moved into the homestead. That was the year the wife took up part time work to supplement the family income.
In the operation of the partnership from 1992 and following the transfer of the O property, expenses related to the running the property were paid out of the sale of stock and wool and that was also the source of funds to pay for the family’s living expenses as well as the children’s education, supplemented as discussed by the wife’s earnings from employment. The partnership seems to have been a relatively successful operation in a financial sense because the history demonstrates that by the time of their separation in 2004 the husband and the wife had accumulated superannuation, cash, shares, and other investments which included realty. A brief summary of their investment in realty follows:
(a)In 2001 they jointly bought a property in A for $110,000 by paying a deposit and borrowing $81,000. The property was rented and the rent paid towards the mortgage repayments.
(b)In February 2002 they purchased two properties at Y for $145,000 with loans from the Credit Union. Repayments came from rent received and from the wife’s part-time income.
(c)In March 2003 one of the lots in Y was sold for $120,000 and the net proceeds invested.
After the wife left the O property she established in due course a residence for herself and the children in town in rented premises. She increased her hours at her part-time position and worked almost full time. The husband continued with the operation of the partnership business from which he paid the children’s school expenses as well as the outgoings on the properties they owned.
At some point after separation the wife was paid a total of $55,000 from partnership funds and the Y investment. She used the money to set up a household and purchase a second hand vehicle and she invested the remainder. She was also given $30,000 as a farm management deposit. In September 2004 the other Y lot was sold for $212,500 and after repayment of the debt the net proceeds of both Y properties were invested in the Credit Union accounts.
As noted earlier, in December 2004 the wife instituted proceedings for parenting orders and property settlement, agreement was reached early on about the children’s arrangements and consent orders were being made on 24 February 2005 for shared residence, the children spending week about with each parent. As also noted earlier, the wife returned to the O property in circumstances of her husband’s illness shortly before his death.
Since then there have been a number of developments as relations between the wife and the executors deteriorated and the property proceedings she had instituted some months earlier remained pending.
Initially the decision was taken that the wife would continue operating the property with the executors. Whether or not there was a ‘loose partnership’ agreement hardly matters at this stage; the fact is there was an arrangement for the O property to continue operating, the wife to be responsible for the usual run of business operations and she and the children would remain living there. To that end a bank account was established in the name of the estate [first account] to which there would be deposited half of the proceeds of sale of stock and the wife would have no access to it. The other half of stock sale proceeds was to be paid into the existing bank account operated by the partnership formerly conducted by the wife and her husband [second account]. She was to have access to that account and from it she was to pay all of the operating expenses. This arrangement established, underpinned by the executors’ view of their responsibilities to the estate, came to be fertile ground for dispute and the wife called it to an end some months later in January 2006.
During the initial months there were discussions between the wife and the executors and their advisors with a view to reaching agreement about the pending property proceedings and the apportionment of assets between the wife and the estate. There was a long meeting in August when agreement was reached in principle and a document produced setting out heads of agreement [annexed to affidavits without objection]. However, no agreement was concluded and as discussions dragged on there were further differences and obstacles to finalisation thrown up. In November there was a meeting between the wife and Mrs Wylder in an attempt to sort out issues, but it seems the gap widened rather than narrowed. Correspondence between solicitors began to mount while the court proceedings continued on their path to final hearing.
Against this background of unresolved differences about the division of property, contrary views about the responsibilities of the executors in their administration of the estate, and working with the income/expenditure arrangement established in the aftermath of the husband’s death, the wife returned to part time work in December for reasons she attributes to the family’s uncertain financial situation.
In January 2006 the wife requested the whole of the sale proceeds of stock, not half, be made available to her to meet all the operating expenditure and to pay living expenses for herself and the children. This was not forthcoming and the disagreements which mounted spilled over into the broader working environment in which the O property operates. The executors communicated with various people and sent letters in a number of directions warning of the consequences of dealing with the wife without their prior approval. In March the wife instituted proceedings in March for interlocutory orders which would give her control of the operations of the O property. Some steps taken in these early months of 2006:
(a)In February the executors sent letters to all agents and to various selling associations advising they require all sale proceeds from stock to be put in trust and not paid to the wife, that she has no ‘legal standing’ in regard to the O property, and livestock purchased by her is not to be transported to the property.
(b)Letters with similar advices were sent by the executors to various rural suppliers and to the veterinary surgeon.
(c)They also sent a letter to the accountant, Mr O, advising they no longer consent to the wife using the property to undertaking farming or grazing except to prepare, in conjunction with the executors, the partnership assets for sale.
(d)The wife had applied to the local Catchment Management Authority to undertake land care work on the O property but one of the executors had written advising she had no legal standing about contracts over the land, that she no longer acts in the capacity of farm manager, and is not entitled to enter into a contract on behalf of the estate and so on.
(e)With shearing approaching, the contractor was contacted in March by Mr Wylder who discouraged him from shearing at the O property until after the upcoming court hearing in May and told him if he went ahead he may not get paid. This was followed by a letter to Mr S in April [copy annexed to Mr S’s affidavit] setting out a deal of information about the executors’ position and advising him that should he choose to shear the sheep then the wife is to be solely liable for their account and no claim on the estate could be made.
(f)In April the wife attempted to obtain an advance on the wool clip sale proceeds from the Wool Centre to help with shearing costs but despite this being a normal procedure it was rejected in light of a letter received from the executors.
(g)There was also dispute about payment by the wife of GST from one of the accounts.
Not surprisingly, there are quite different perspectives about what obviously had become open conflict from fixed positions. There is no need to give a detailed account of it and I trust what follows fairly reflects their positions:
(a)The executors cite five instances of the wife selling ‘partnership assets’ without reference to them as the other partners – the dates being May 2005, January 2006, February 2006, March 2006, with crossbred lambs also being sold to a family member in March 2006. As they see it, she knowingly continued to deal in partnership stock despite their instruction to the contrary. Further, three amounts had been removed from the partnership account with the Credit Union between October and December 2005. By writing to suppliers and agents and others informing them the partnership had been dissolved and any transactions were without their consent, they were safeguarding partnership assets which they regard as their responsibility under the terms of the Will. The wife had commenced shearing despite their instructions and despite the pending interlocutory court hearing she had instigated and she attempted to encumber estate assets by taking out a loan over the wool to be sold. From their point of view, they have only ever acted according to their responsibilities as trustees and executors and the wife has disregarded their legitimate actions in pursuit of those responsibilities.
(b)The wife approaches it from a lifelong involvement and experience in primary production and all but one of the previous 17 years living and working on the O property when she returned there in May 2005. In working to improve the property to return it to a profitable and sustainable level, she has made all decisions related to the operations capably but has been met with interference and a lack of co-operation from the executors who have obstructed her efforts and, she maintains, acted in their role so as to make her feel threatened, apprehensive and vulnerable. She also maintains the executors are not objective about their role, more particularly Mrs Wylder who has said things to her of a judgmental and punitive nature such as ‘You left, [wife’s name]. You can’t expect to walk back in as though you never left’, ‘You brought this upon yourself [wife’s name], ‘You are taking your own children to court’, ‘You chose to leave. [The husband] left [the O property] to the children’. She sees the letters to suppliers, agents and carriers as divulging confidential information and obstructing the normal running of the property which she has been operating and seeking to preserve until the final hearing. Sales of stock were not only in the normal course of business but necessary for the cash flow essential to the operation of the property. Their steps to delay the shearing were counter productive and contrary to sound stock care. She was not trying to ‘encumber’ estate assets by requesting an advance on the wool clip for shearing costs and her approach was a normal business arrangement to meet shearing costs which have to be paid months before the wool is sold.
Confirmed and reinforced during the running of the hearing, these irreconcilable positions demonstrate the impossibility of them working co-operatively in the future pending the time the children will take their interest in the estate assets. That has to be borne in mind at the stage of considering what orders will be just and equitable.
The wife’s interlocutory application came on for hearing on 16 May 2006 and she was successful in achieving orders largely according to her application. Effectively those orders gave her control of the O property and the business operations there, with provision made for the accountant to provide to the executors periodic information and documents. The orders also directed the sale of shares and the sale of the A property with equal distribution of the sale proceeds as well as equal distribution of certain managed funds. Their terms are set out in Schedule D.
Since the orders of May 2006 shares in the joint names of the husband and wife were sold and later, in February 2007, the A property was sold. The sale proceeds were distributed according to the orders. These and other earlier and later financial dealings are set out in tables in Mrs Wylder’s affidavit at paragraph 68, stretching back to separation in May 2004. There was no challenge to the accuracy of the information provided there of the source and application of funds can be taken to reflect the movement of funds from separation to the swearing of the affidavit in September 2006.
Turning to the table referable to the wife, the funds available to her are identified as coming from drawings, rental on the cottage at the O property, rental on the A property, and various lump sums from the ‘Y Funds’ as well as sale of joint shares, liquidation of the managed funds and from Colonial First State. How the total received of $286,098 was disposed of is then identified in as much as Mrs Wylder is able to say. It includes expenditure related to taxation, medical, living costs, school fees, legal costs, rates and insurance and land tax. Some of the money received was also held in identified accounts or was lent to the partnership account. The detail:
Cash drawn from partnership and farming business
Drawings from 4/5/04 to 30/6/05
Taxation 14,842.95
Medical 224.70
General living & spending 5,435.53 20,503.18
Drawings from 1/7/05 to 23/1/06 [reference to 05 in #68 must be an error]
Taxation 15,232.04
Medical 2,688.75
School fees 8,218.20
Legal 880.00
Private use phone, electricity, fuel etc. 3,437.83
General living and spending 14,135 .83 44,589.65
Drawings from 24/1/06 to 31/7/06
Taxation 5,313.95
Medical 76510
School fees 12,491.20
Legal 6,287.30
Private use phone, electricity, fuel etc. 3,828.75
General living and spending 10,350 .88 39,035.18
Rentals
Cash rental from Cottage from 31/5/05 @ $125 per week
General living and spending 7,750.00
A property Rent 27/9/05 to 31/3/06
Council & water rates, insurance, land tax 2,304.36
Balance held in farm account 2,845.64 12,900.00
Lump sums
Amount from Y Funds
Unknown 10,026.33
Amount from Y Funds
Unknown 45,000.00
Amount from Y Funds
Amount to Farm Management Deposit 30,000.00
Amount to Farm Account 4,679.57
Amount from Y Funds
Loan to Farm Partnership Account 40,713.22
50% sale of joint shares 18,649.05
50% liq. of BT Managed Fund 4,294.24
100% liq. Colonial First State 15,708.44
Held in B Credit Union account 38,651.73 169,070
Total 286,098
As for the lump sums, use unknown, reference was made earlier to the wife’s evidence of receiving a total of $55,000 after separation and to the $30,000 invested in the farm deposit. She sold the vehicle she had acquired with some of these funds in 2005 after she returned to the O property and paid off the debt related to it and invested the balance. The farm management deposit has now increased to $44,000 but that results from transfers from other accounts. The $40,713 she received in November 2005 was put into the joint account and used in running the property and paying expenses and maintenance and eduction expenses for the children.
Turning to the husband’s and estate’s position, receipts have come from drawings, rent, and liquidation of funds, share sales and life insurance paid after the husband’s death. Receipts in that period totalled $251,933. Payments have included taxation, school fees, medical, general living, funeral and wake, probate, legal fees, the bequest to the executors, estate administration, overdraft, mortgage payment and funds held in accounts in financial institutions. The details:
Drawings received by the husband
Partnership Drawings from separation to date of death
4/5/04 to 31/5/05
Taxation 15,173.80
School fees full year 2005 14,182.60
Legal 5,370.69
Medical 409.25
Private use Portion of Farm Utilities 4,863.56
General living and spending 26,050.67 66,050.57
Rentals received by the husband
Cash rental from Cottage from separation
to date of death 4/5/04 to 31/5/05 -
General living and spending 7,000
Received by the estate
Partnership Drawings 1/6/05 to 31/7/06 72,719.41
Deposit - sale of Y banked to ABS 8,082.05
Superannuation paid out 8,007.37
50% sale of joint shares 18,649.05
50% liquidation of BT Managed Fund 4,294.24
50% liquidation of BT Managed Fund 15,708.44
Dividends refunds rebates interest rec’d 1,422.65
Paid out by estate from above amounts received
Partnership costs 4,613.79
Taxation 11,125.80
Funeral and Wake 7,145 .74
Probate, Valuations & legal fees 14,018.51
Legal Fees (husband) 23,962.00
Legal Fees – estate 45,790.05
Bequest 5,000.00
General & Estate Admin 2,190 .30 113,846.19
Balance held – B Credit Union Estate 15,037.02 128,883.21
Insurance received
Death Cover re Mortgage Insurance -
Overdraft 27,582.33
Mortgage – A property 22,417.67 50,000.00
Total 251,933.78
There are three comments to be made about these figures but otherwise they do not give rise to anything of significance for present purposes:
(a)The first is that there has been a full and satisfactory accounting for money available to all parties since the separation in May 2004 and, subject to views that might arise from the level of legal costs incurred, there could be no suggestion of waste or unnecessary or reckless spending or the like levelled in any direction. While the wife has not received any child support from the estate, she has had funds available from sources identified which she has applied towards the children’s expenses. Mrs Wylder noted at one point in her evidence, when questioned about the absence of any payment of child support, that the wife has had the benefit of occupation of the O property and the use of it for primary production.
(b)The second is to recognise that there has been a difference in combined capital and income receipts, with the wife taking a little over $34,000 more during that period than the combined husband/estate figure. By the same token, she has had far different financial responsibilities from the executors these past two years, not only in the day to day working of the O property but also to the children.
(c)The third relates to legal fees which have now outstripped the amounts reflected in these earlier figures. The husband/estate schedule puts legal fees and disbursements paid at a total of $75,122 but the costs memorandum tendered at the hearing [exhibit 1] shows that as at 31 August 2007 the estate has incurred costs totalling $108,781 – made up of costs incurred but unpaid of $25,574, costs paid $60,542 [plus $1,000 being held in trust], and estimated costs of the hearing of $22,664. Added to that, there are additional costs incurred by the husband before his death totalling $23,962 which have also been paid. The combined total of costs incurred by the husband/estate therefore is $132,743. As for the wife’s legal fees and disbursements, exhibit 1 reflects she has paid costs of $96,157 from her savings and available funds and there are unpaid costs estimated to be $75,900 up to the second day of hearing, making a total of $172,057, actual and estimated. There were no submissions from either counsel about adding back to the assets legal costs paid so as to reflect assets notionally available to each but for the payment of those costs. There is a differential in what has been paid, but I do not propose disturbing the common approach taken and it can be seen as acceptable in the circumstances.
The wife says the property had been run by her and her husband profitably since 1992 and she has continued to run it profitably since May 2005. The financial accounts related to the operation of the business were tendered [exhibit 7] for the financial years ended 30 June 2006 and 2007. The net profit for the 2006 year was $27,957 and for the 2007 year was $81,639. It is her evidence that since she has been the sole operator, she has carried out improvements and implemented changes to improve operations. This has included the usual management of stock to accord with the primary production cycle and initiatives to improve stock - shearing, drenching, weaning, lamb marking, treating for fly, crutching, mulesing, branding and tagging cattle, joining stock, control measure directed to the health of the stock and a program of rotational grazing. She has restored and repaired fencing, repaired the woolshed, undertaken mechanical service to vehicles and equipment, and cared for working dogs and horses. She attempted to instigate a small land care project to complement others and she has also done the book work by computerising and she has introduced budgeting. She has worked the property herself save for hired help as required. Her evidence to the effect that she has worked to improve stock and pastures and infrastructure while caring for the children is accepted.
The wife’s income currently is $315 per week from her professional work and she also receives $115 per week rent from the cottage on the property. Her estimate for certain of the children’s expenses is $450 per week, other family expenses amount to $200 per week and their private school fees [at an earlier time] were $500 per week. As from the second term of 2007 G no longer attends private school and attends a local high school where she is in year 9.
Assets and liabilities
On 4 June during an appearance before Le Poer Trench J the parties handed up an agreed list of assets and liabilities. It was agreed at the time to disregard furniture, firearms and jewellery, held both by the estate and the wife at the O property. At the hearing there was a submission from the estate proposing retreat from that agreement by including a figure for furniture, reflected in the wife’s financial statement, of $5,000. No steps had been taken to obtain valuations of those items, understandably given the prior agreement which, in my view, should hold fast. Those minor items will be disregarded.
There is another dispute about the composition of the net assets. The figures agreed for stock [both sheep and cattle] on the list handed to his Honour were expressed to be as at 16 April 2007. Subsequently the wife sold 273 sheep [some were merino wethers and others were cross bred lambs] and 39 cattle for $39,911. She also sold 48 bales of wool for $57,169. These sales occurred around mid-June, after the 4 June appearance at court. The 2007 financial accounts [exhibit 7] show income as including profits on sale of stock and from the sale of wool as at 30 June and, prima facie at least, these transactions were accounted for to arrive at the net profit figure as at that date. In any event, there is dispute about how these changes ought now be reflected in the assets for division.
The estate seeks to add the sum of $57,169 received from the wool sale, the argument being it was ‘overlooked’ when the assets were compiled for the 4 June document. That is resisted by the wife. Her counsel, Mr Gould, argues for the addition only of a further $14,269 which is arrived at in a rather roundabout way. It is based on the wife’s evidence that some of the sheep were in full wool when they were valued on 16 April and their value was reduced by later shearing in mid-May. If the wool sale proceeds are to be added to the assets there would need to be a commensurate recognition of the drop in the value of the sheep. The wife’s evidence was that the drop in value without full wool for the 1950 sheep involved would be $22 including GST, giving a total of $42,900. The submission is that figure should be deducted from the $57,169 leaving a net figure of $14,269 which would be added to the assets.
From my point of view, resolving the dispute along either line is fraught with difficulty by reason of the absence of any proper evidence about it and the impact on the earlier agreed assets. The whole business is based on the sale of stock and wool and that core income is the source of payment of operating expenditure to derive it in the first place. To start adding wool sales income to assets without accounting for the expenditure necessary to earn it strikes me as fundamentally problematic, not to mention that exercise ignores the impact of the transaction on the business balance sheet items. Certainly I reject the estate’s proposition that the whole of the $57,169 should be added to assets. Not only does that have the conceptual difficulties inherent in mixing income with assets, it takes no account of the reduction in the value of sheep after shearing when they were in full wool in April and [presumably] were valued on that basis. Mr Gould’s exercise of calculating the reduction in the value of the sheep after shearing and deducting that from the wool proceeds is similarly problematic. For my part, I would have been inclined to leave the figures at those agreed on 4 June, there has to be a ruling off of movements at some date, but in the final analysis the submission for the wife amounts to a concession that $14,269 should be added to the assets and a concession cannot be ignored at this stage of the process. Therefore, that figure will be added to the assets.
Finally, what has not been included in the liabilities are the costs associated with the estate’s sub-division proposal, being fencing, selling costs and estimated capital gains tax. That is because the condition on which they propose sub-division will not be established, as later evaluations and assessments will record.
On that basis, and having regard to findings already recorded, the assets and liabilities are:
Property
The O property 3,500,000
Estate assets
1269 IAG Shares 7,626
200 Ansell shares 2,420
Proceeds sale of motorbike 6,000
B Credit Union account 46,510
62,556
Less:
2005/06 tax 13,394 49,162Joint assets
B Credit union account (Y balance) 43,849 43,849
Partnership assets
Sheep 120,950
Cattle 118,180
Livestock 11,136
Plant & equipment 100,290
B Credit Union Account 171 350,727
Wife’s assets
AE 13,868
AI Fund 17,353
St George Freedom Cheque a/c 11,837
St George Freedom Power Saver 32,826
Shares – GDY, IAG and OSH 1,784
St George Freedom Business a/c 1,596
Farm management deposit 30,000
Horses, gear & float 6,850
Wool sale adjustment 14,269
130,383
Less:
2005/06 tax 6,850 123,533
Superannuation - wife
Superannuation BT 10,615
Superannuation First State 21,591 32,206
Total net assets: 4,099,477
Evaluation of contributions
The assessment of contributions may be approached globally, where all of the history is assessed against the whole of the net assets, or it may be approached by reference to individual assets or separate categories of assets. Authority for this is the High Court decision of Norbis (1986) FLC 91-712. However, there have been subsequent Full Court cases where particular circumstances are said to lend themselves more to one approach than the other. For example, in Bonnici (1992) FLC 92-272 the Full Court discussed the impact of substantial assets coming into the husband’s hands by way of inheritance shortly prior to the end of the marriage, thus making the asset by asset approach more appropriate and in McMahon (1995) FLC 92-606, involving a relationship of six years duration with no children and the parties had separated their financial affairs two years prior to separation, again the Full Court considered the asset by asset approach more appropriate. Whichever approach is taken, the outcome has to conform to the just and equitable requirement of s 79(2).
In this case there were no direct submissions about approach by either counsel, but their submissions were based on the global approach. That is not inappropriate to the history, though it seems to me it might also have been argued that the history related to the major asset, the O property, warrants consideration of contributions to that property separately to all other property. While the common global approach by counsel will be followed, it will also be useful to check the outcome against two categories of assets: the O property and the rest.
Contributions of the kind referred to in s 79(4)(a) – (c) have to be assessed over a total period of 18 years, 15 of which are referable to the period before separation.
The wife came to the marriage in a stronger asset position than her husband by reason of the equity in the home she had purchased at L some years earlier. In due course she sold that property and she contributed the relatively substantial equity, most of it towards the purchase of a vehicle which was used in the operation of the partnership business. She brought some stock with her and that was agisted on the O property at no charge to her, but there is no suggestion she did not contribute whatever she derived from them eventually towards family expenditure of one kind or another. Indeed, the same can be said of her earnings from employment away from the O property throughout the course of the marriage, either initially before the birth of their first child or in the later 5 years or thereabouts prior to separation.
Around her commitments to paid employment, she made a significant contribution to the work undertaken on the O property. Until the formation of the partnership in 1992 she assisted her husband who was a paid employee for which she received no remuneration and after 1992 she worked on the property with her husband. As well as those contributions she was the primary carer of the children up to the point of separation and she also had responsibility for doing most of the domestic household chores.
From the formation of the equal partnership in 1992 both the husband and the wife conducted the business and both contributed by taking on the responsibilities and risks associated with their position as a partner and in paying off the stock debt as well as meeting other financial commitments undertaken over time. The husband worked on the property but the wife had the background and experience to make a meaningful contribution to its running and it is accepted that she did. She worked almost full time on the O property after the children began school and her contributions included the management of livestock, the instigation of new practices such as a quality assurance program for the cattle, shorter joining periods for stock, better handling techniques and weaning for calves, stud and pasture management, and the planting of thousands of trees on the property. The partnership they operated over the years until their separation was able to accumulate investments as well as meet family living expenses, thereby giving some indication of its financial success.
As for the husband’s other contributions, he introduced property of much more modest value to the marriage. He contributed his earnings from his work for his parents to the family’s needs. When life entered a new phase after the formation of the partnership he worked with his wife in the operation of the partnership as already discussed, but they also derived other benefits from the arrangement at the time with his parents, for which he gains the credit. By that I mean the use of the O property and the use of the plant and equipment in the conduct of the partnership and the interest on outstanding payments to purchase the stock being at favourable rates. The transfer of the O property in 1996 took place when the value of the property was $1.166 million. As the agreed current value of $3.5 million indicates, it has appreciated considerably in value since the transfer - by around $2.334 million – and that spans a period of around 8 years when both husband and wife were contributing in the ways discussed to the operation of the partnership as well as to the conservation and improvement of the land as well as to the welfare of the family.
Viewed to the point of the separation in May 2004, the history demonstrates the wife to have been active and hard working, making significant contributions as an income earner, homemaker and parent, and worker on the property through the stages when her husband was an employee, when they operated it in partnership after purchasing the stock, and continuing after the land was transferred to her husband. It also demonstrates the husband to have contributed through his work on the O property throughout those years, to have applied the income earned either as an employee or partner for family purposes, and to have contributed the benefits derived from the arrangement with his parents in 1992 as well as the transfer of the O property itself in 1996.
Following separation for a time the children were primarily cared for by their mother, with support and assistance from their father, and some months before his death agreement was reached and orders made about the children spending equal time with each parent. During those initial months of separation the wife was provided with funds to re-establish herself and the children and given other monies for investment. The husband continued to run the property and worked on the O property to maintain the partnership business.
However, for the past two years plus since her husband’s death in May 2005, the wife has made significant contributions described in s 79(4)(a) – (c). She has conducted the primary production operations on the O property and has worked to conserve and improve the property and its income earning potential by oversighting its cycle of production and she has undertaken the work associated with that. She has paid expenditure from the income available to her, either as initially agreed with the executors or later as provided by the May 2006 orders. She has continued to earn income from part time work to supplement the funds available to the family. She has been the sole carer of the two children and no doubt that has involved assisting them with the grief of losing their father and facing the uncertainty related to the unresolved litigation of which they [G at least] are obviously aware.
In addressing the husband’s contribution, the estate’s counsel, Mr Thistleton, cited and relied on the judgment of the New South Wales Court of Appeal in Kardos and Sarbutt (2006) 34 Fam LR 550 [per Brereton J with whom Basten JA and Hunt AJA agreed]. However, what was said there cannot be read in isolation from the observations and criticisms of a subsequent and differently comprised Court of Appeal in Bilous v Mudaliar & Anor (2006) 35 Fam LR 55. [I have discussed these in C and L (2006) FamCA 1366]. The cases relate to the weight to be given to initial contributions and the treatment of capital growth in an introduced asset, but they are also apposite to circumstances such as here where a significant assets was introduced by one party in the course of the marriage and there has been capital growth. In Kardos v Sarbutt the Court concluded appellable error by the trial judge who was said to have given the initial contributions manifestly inadequate weight. In the leading judgment Brereton J approved the approach adopted earlier in Burgess v King (2005) 34 Fam LR 528 as giving ‘…due weight to the time value of money, and recognises that capital gains are the product of the initial introduction of the property, rather than of ongoing contributions.’ Along the way, there was discussion of the decision of the Full Court of this Court in Pierce (1999) FLC 92-844 and reference made to the ‘erosion principle’ it was said to have established. His Honour later said:
‘….If one party has a house worth $250,000 at the outset, and it appreciates during the relationship to be worth $750,000, the contribution is of a house which at separation is worth $750,000 – not of money worth $250,000.’
But Bilous v Mudaliar [Ipp JA gave the leading judgment, Giles JA and McColl JA agreed] was critical of the discussion of the ‘erosion principle’ said to be apparent from Pierce and held that any such principle (as a rule) should play no part in the determination of property proceedings under s 20 of the Property (Relationships) Act (NSW) 1984. As Ipp JA said, an ‘erosion principle’ starts the enquiry with a determination whether an initial contribution has been made, followed by a consideration as to whether that contribution was ‘eroded’ by later contributions of the other party. The discussion concludes with this passage:
‘67 Thus, it is not necessarily the case that, if one party has a house worth $250,000 at the outset, and it appreciates during the relationship to be worth $750,000, the contribution is of a house which at separation is worth $750,000 not of money worth $250,000. There may be many reasons why, at separation, the party who contributed the house worth $250,000 was able to retain the house during the relationship (and, perhaps, earn money by pursuing some professional or business occupation as well). One obvious reason might be non-financial support that provides the domestic platform enabling the owner of the house to earn sufficient income to service the cost of the house. There are other non-financial contributions that a party may make which enable the owner of a house to retain the property while the relationship endures.’
As I discussed in C and L, that is consistent with the approach of this court and Pierce does not establish an ‘erosion principle’; in fact their Honours distanced themselves from analysis undertaken in earlier cases when they said:
‘28. In our opinion it is not so much a matter of erosion of contribution but a question of what weight is to be attached, in all the circumstances, to the initial contribution. It is necessary to weigh the initial contributions by a party with all other relevant contributions of both the husband and the wife. [my emphasis] In considering the weight to be attached to the initial contribution, in this case of the husband, regard must be had to the use made by the parties of that contribution. In the present case that use was a substantial contribution to the purchase price of the matrimonial home: See also Campo and Campo (unreported, Full Court (Ellis, Lindenmayer and Finn JJ), Sydney, delivered 19 May 1995 at pages 21 and 22 of the joint judgment) and Zahra and Zahra (unreported, Full Court Sydney, delivered 3 October 1996, per Ellis J. at page 10). ’
A proper approach to s 79 requires that the whole of the contributions be evaluated so as to arrive at just and equitable outcome, but account is to be taken and weighed in the husband’s favour here of his introduction during the marriage of a substantial property that has increased in value during subsequent years, amongst other contributions he has made. When their respective contributions are viewed globally, these considerations related to the O property, and to a much lesser extent the other benefits provided by his parents, weigh solidly in his favour having regard to the magnitude of the introduced property which provided the family with their home and constituted the base from which the husband and his wife derived their income (for the most part) to support themselves and their family, though of course they both made contributions to the conservation and improvement of the property, as discussed, in the many years to follow.
Applying the weight decidedly to the husband/estate’s side of the scales, an assessment of 30% to the wife and 70% to the husband/estate is an appropriate reflection of their respective contributions. Applied to net assets of $4,099,477, that would give the estate now an entitlement to assets worth $2,869,633 and to the wife assets worth $1,229,843, a differential of $1,639,790.
Alternatively, if that assessment is checked against the O property separately from the other assets, a division of the O property in those proportions would give the husband/estate $2,450,000 and the wife $1,050,000, reflecting a differential of $1.4 million. Obviously that is more than the value of the property when introduced in 1996 but the assessment is not a mathematical exercise and has to recognise the contributions of both the husband and the wife to the conservation and improvement of the O property as well as the wife’s contributions since her husband’s death. The history considered, that weighting is appropriate. As for the other assets, worth a total of $599,477, a division in those proportions would give the husband $419,634 and the wife $179,843, a difference of $239,791. Again if the history of contributions to those particular assets, which are of mixed origin and include partnership assets and the wife’s superannuation, is assessed then a weighting of that magnitude is warranted to recognise the benefits derived from the husband’s parents.
I am satisfied, therefore, that contributions assessed at 70:30 in the husband’s/estate’s favour is appropriate.
Effect of order on earning capacity
The estate’s subdivision proposal is expressly dependent on the wife being entitled to no more than 31.5% of the net assets and can be discarded for that reason [after consideration of s 75(2) factors to follow], quite apart from the likely impracticability of the proposal – for example, if commercial terms were to translate into a lease payment of $90,000 per annum as the executors foreshadowed, that is more than the net profit for the year just passed from use of the whole of the land. The executors other proposal is for sale of the property. As the wife sees it, sale would dismantle a profitable business and require the sale of breeding stock which has taken many years to establish. It is recognised that the executors also propose that she may retain the assets of the partnership conducted by her and her husband, including the stock and plant and equipment. But without the land it is not apparent how she would be able to use those assets to earn income as a primary producer. Accordingly, a sale of the property would, for all practical purposes, see an end to her capacity to earn income in that way. Of course she would still have her professional qualifications to fall back on.
Section 75(2) factors
Section 75(2) is about reviewing future needs and plainly the only relevant considerations are those that relate to the wife. There are a number of cases which have considered the impact of death of a spouse on this stage of the exercise [eg. Lawrie v Lawrie (1981) FLC 91-102 (per Asche, Fogarty and Gee JJ); Menzies v Evans (1988) FLC 91-969 (Smithers J); Tasmanian Trustees Limited v Gleeson (1990) FLC 92-156 (Strauss, Baker and Nygh JJ); Parrott v Public Trustee of NSW (1994) FLC 92-473 (Nicholson CJ, Lindenmayer J and McGovern J); Homsy v Yassa; Public Trustee (1994) FLC 92-442 (Coleman J); Mason v Mason & Mason-King (1994) FLC 92-446 (per Baker, Lindenmayer and Bell JJ); W & W [1999] FamCA 1765 (Jordan J); G v The Public Trustee of the Australian Capital Territory (as Legal Representative of N) [2002] FamCA 751 (Finn J); and K and P [2003] FamCA 1491 (Collier J)]. While it is useful to look to these cases to review the approach taken, each turns on its own facts, so there is nothing to be gained by discussing them individually. Their common thread is that the death of a spouse may have a significant impact on the application of s 75(2) factors but the survivor nonetheless must establish future needs and, if need is established, the extent of the adjustment will vary in the exercise of the broad discretion granted depending on the particular circumstances of the case; for example, by considering the size of the assets for division, the assets of the surviving spouse, age and health, and any of the other relevant factors to be found in the sub-section.
In this case, the wife is 48 and in good health. Based on the assessment made of her contributions, she will retain property to the value discussed. To supplement her capital base, she has the capacity to earn income from her professional qualifications and experience. The level of earnings if she were to pursue that path full time is not apparent, but can be taken to represent a modestly comfortable living. She also has the capacity to earn income from work as a primary producer provided the means are available. Of significance here is the fact that she will have the sole responsibility for two children who are currently aged 16 and 15 years respectively and thus there are several years to go yet before the youngest attains her majority at the age of 18. This is not a particularly long time but it is an important time nonetheless for children when they require supervision and guidance in their upbringing. That role will fall solely to their mother and it places on her a greater than normal burden of parental responsibility. From her earnings she will have to support them to the extent that the estate does not provide financial support, including their education expenses and all their usual day to day needs.
In my assessment, the wife has established a case for further adjustment in her favour in recognition of her future needs and the additional burdens of her future responsibilities to the children as their sole surviving parent and that would be appropriately met by a further 10% of the net assets, which amounts to around $409,000.
conclusion
Those assessments lead to an overall entitlement to the net assets of 60% to the estate and 40% to the wife.
Effect of proposed order
That would give the wife total assets worth $1,639,790. The implementation of that entitlement gives rise to several possibilities. One that occurs, given the executors’ proposal that she may retain the partnership assets, is that she would take those assets totalling $350,727, she would retain her own assets worth (net after tax) of $123,533 plus her superannuation of $32,206, thereby receiving assets worth a total of $506,466. The remainder, amounting to $1,133,324, could come from the assets held by the estate and the joint B Credit union account but, whatever the case, it is obvious that she will have to receive either the whole or part of her remaining entitlement by taking a proportionate interest in the O property or from the proceeds of its sale. The estate has incurred unpaid legal fees and as they have to come from somewhere, it would seem appropriate to leave the estate with the assets listed as being owned by the estate in the earlier list and the joint B Credit Union account. In that event, the source of meeting the balance of the wife’s entitlement would be the O property. The sum of $1,133,324 is 32.38% of its agreed value.
On the other side of the ledger, the estate’s 60% entitlement translates to assets worth $2,459,686. Putting aside the assets just mentioned, to be retained by the wife, they would be left with the estate assets (net of tax) of $49,162 and the joint asset in the B Credit Union account of $43,849, a total of $93,011, thereby leaving $2,366,675 to be found in a proportionate interest in the O property or its sale proceeds. That amount represents 67.61% of the property’s agreed value.
The allocation of assets as discussed is appropriate; however, the calculations of entitlements related to the O property or its sale proceeds will be rounded to 32.5% to the wife and 67.5% to the estate.
just and equitable outcome
The wife’s 40% entitlement overall means subdivision is out of the question, quite apart from her rejection of it and the inherent issues that might have arisen in implementing it.
On the basis that the assets are allocated as discussed, it remains to consider how the respective entitlements to a proportion of the O property are to be realised. As I see it, there is more than one possibility.
First, putting aside for the moment the fact that neither the estate nor the wife seek it, one is an arrangement whereby the wife and the executors operate the O property in partnership, the wife and the estate taking the assets in the proportions discussed, until the children take their entitlements as stipulated by the Will at the age of 25 which, at least for G, will be in a decade’s time.
Of course the children attain their majority and adult status much earlier: in 18 months for A and a year or so beyond that for G. This brings to mind the rule in Saunders v Vautier which stems from the English decision of that name reported (1841) Cr & Ph 240; 49 ER 282. The rule enables a beneficiary who becomes sui juris [upon attaining adult status, now 18] and is of full legal capacity to become absolutely entitled to his/her interest and thus put an end to the trust created by the Will by requesting the trustee/s for a transfer of the interest to the beneficiary, notwithstanding that the testator postponed the beneficiaries entitlement to a time beyond their majority – in Saunder v Vautier to the age of 25, the same as in this case – and despite the request having the effect of frustrating the testator’s intention. [see Jacobs Law of Trusts in Australia [1997, Seventh edition, Heydon and Leeming, at [2313] and following; see also discussion by Richard Boaden, Victorian Law Institute Journal, December 1986, “Altering age qualifications in wills pursuant to Saunders v Vautier”]. To apply, it is necessary for the class of beneficiaries to be closed and herein may lie an obstacle in this case by reason of the presence of a default beneficiary, the husband’s nephew. In any event, the rule was not the subject of any submissions and can be taken no further. The more prudent and necessary view here is that there will be another 10 years or thereabouts before the children beneficiaries obtain what is left of the estate’s entitlement to assets.
It is clear that the state of relations between the wife and the executors has long since reached the point where there could be no realistic prospect of a co-operative relationship over the coming decade so as to run the O property in partnership until the children take their interest, with or without the sort of framework laid down by the May 2006 orders. The prospect of a continuation of agitation of the sorts of disputes that spilled over into the local working rural community in early 2006 could not be dismissed; certainly there was no indication in the course of the hearing of a softening in attitude or change in direction from either side. So I am satisfied it would be impracticable to implement such an arrangement to run for such a long period and I certainly could not be satisfied the imposition of it would achieve a ‘just and equitable’ outcome.
Secondly, the more readily obvious possibility is a sale of the O property, as contemplated by the estate’s application, and a distribution of the net proceeds in the proportions assessed. That course would be bolstered by the provisions of s 81 of the Act which obliges the court to make such orders as will finally determine the financial relationships between the parties and avoid further proceedings between them ‘as far as practicable’. But a sale of the O property would mean an end to any future for the family on that property which has been the children’s home all their lives and an end to any prospect of either or both children taking over the running of it in the future, if that be in contemplation. It will certainly be the end of their mother’s opportunity to continue working the property profitably to support herself and them while ever there remains a need. Nor can I see that option as fitting the requirement to achieve a ‘just and equitable’ outcome.
Thirdly, there is the wife’s primary application that she receive an interest in the O property [putting aside the proportions she proposed] and the remainder be held by her in trust for the children until they are 25 years of age. This raises the question whether there is the power to achieve that and, if so, should it be done.
section 79(1) – the children
In my view, there is power and it lies in s 79(1) which, as set out earlier, enables the settlement or transfer property, as the court determines, for the benefit of a child of the marriage and it is a power available in proceedings derived from s 79(8).
There is no question of the validity of s 79(1) because that was considered by the High Court in Dougherty v Dougherty (1987) 163 CLR 278 (Mason CJ, Wilson, Dawson, Brennan and Gaudron JJ). In that case an adult child intervened in property proceedings between his parents and made a claim for settlement of property in his favour, arising essentially from assistance he had provided in the running of the family farm. The husband’s objection to his application, based on the proposition that it was not a matrimonial cause, was dismissed by the trial judge as was the further proposition that it was beyond the legislative power of the Commonwealth. In their joint judgment, the majority [Mason CJ, Wilson and Dawson JJ] considered the circumstances supporting a claim by or for an independent adult child will be exceptional though acknowledging the Family Court is empowered to make an order under s 79 when satisfied that in all the circumstances it is just and equitable to do so. Yet to attract jurisdiction, the circumstances must be such that the claim arises out of, or has a sufficient connexion with, the marriage relationship and thus qualify as a law with respect to marriage. Accordingly, the rights and duties which this Court may validly create or define under the section are confined to those which have their basis in the marital relationship and the power to make any order will depend upon whether the order is referable to the relationship of marriage.
That the children involved here are not adults is immaterial to that analysis and there could be no doubt that the order sought by the wife for the benefit of the children does fall within that discussion and thus is a claim based on circumstances arising out of, and having sufficient connection with, the marriage relationship.
There is then the question of what is to be taken into account in considering the exercise of discretion involved. There is a discussion of this by Treyvaud J in Randle (1987) FLC 91-828 at p 76,228 which involved a claim by an intervenor on behalf of children for certain assets from their deceased mother’s estate, relying on s 79(1). His Honour addressed the submission that in the exercise of discretion he could take into account only the matters specified in s 79(4), in particular that he could not take account of the children’s financial position, or needs, or the manner in which they are being educated or trained. In rejecting the submission he referred to dicta of Strauss J in Ferguson (1978) FLC 90-500 and went on to cite with approval the following passage from the judgment of Barblett J in Willett (1976) FLC 90-022:
‘By virtue of sec. 79(1), the Court is empowered to make such order ‘as it thinks fit’. This gives the widest possible discretion. By subsec. (2) the Court is not to make an order ‘unless it is satisfied that, in all the circumstances, it is just and equitable to make the order'.... The widest discretion is still open to the Court under this subsection, and if it were read on its own the criteria upon which the Court must exercise its discretion comes within the terms `in all the circumstances'. The Court, however, must have regard to subsec. (4) where criteria are spelt out for the exercise of the Court's discretion as to `what' order it should make. It seems to me that the legislature has not confined the Court to the criteria set out in subsec. (4) in making a determination under subsec. (2).’
His Honour noted these observations to have been cited with approval by McCall J in the later case of Zappacosta (1976) FLC ¶90-089 at p. 75,423:
‘No doubt many of the considerations in subsec. (4) will be relevant in determining whether the justice and equity of the case requires the Court to exercise its discretion and alter the interests of the parties. But the Court is not restricted to the matters referred to in subsec. (4) and by incorporation sec. 75(2). It may well be that in all the circumstances there are factors of qualification or disqualification which may influence the Court in the exercise of its discretion which are not specifically referred to in subsec. (4).’
He noted that s79(4)(e) requires account be taken of the matters referred to in subsec 75(2) in so far as they are relevant and s 75(2)(o) specifies ‘any fact or circumstance which, in the opinion of the court, the justice of the case requires to be taken into account. He concluded, therefore, that he may take into account factors in addition to those specified in s 79(4) and in the case before him considerations included the children’s needs, their income, earning capacity, property, financial resources, and the manner in which they are being educated and trained. An order settling property on the children was made in that case.
I respectfully agree with that analysis. S 75(2)(o), if nothing else, allows considerations which the justice of the case requires be taken into account. That is consistent with the obligation imposed by s 79(2) to not make an order unless, in all of the circumstances, it is satisfied it is just and equitable to do so.
I should not pass over the submission from Mr Thistleton, arguing against the wife’s primary position, to the effect that acceding to her application for orders settling property on the children with the wife as trustee would constitute an impermissible interference with the testator’s express wishes in the disposition of his estate and would usurp or intrude upon the jurisdiction of the State court’s in testamentary matters. But I do not accept that.
The High Court in Fisher v Fisher (No 2) (1986) FLC 91-767 put the constitutional validity of s 79(8) to rest, relying on the marriage power under 51(xxi), and the judgement of Brennan J (as he then was) at 75,599 is instructive. His Honour said that proceedings under s 79(1) of the Act arising out of the marital relationship subjects the whole of the property of the spouses to the discretionary jurisdiction of this Court, the interests of the spouses in the property may be altered, and either or both of them may be ordered to settle or transfer property ‘for the benefit of either or both of the parties [to the marriage] or a child of the marriage’, thus making the property of the spouses available to answer those claims against the spouse who is entitled to the property. The passage continues:
‘It mistakes the operation of sec 79(1) to say that a proceeding under that subsection arising out of the marital relationship does not affect the property of the spouses until an order is made. So soon as the proceedings are commenced, the Family Court may make “such order as it thinks fit” to adjust the proprietary interests of each spouse and of the children of the marriage in the property of the spouses.’
His Honour later noted that the death of a spouse will not always extinguish or satisfy the ‘moral claims’ of the surviving spouse and children to which effect would have been given if the proceedings had been completed. And further:
‘Section 79(8) provides machinery for the discharge of those moral obligations in priority to any rights in the property of a party to a marriage which arises by testamentary disposition of that party’s property or by any other devolution of that property of that party’s death….’
The reference to ‘moral claims’ was interpreted by Strauss J Allan and Allan (1987) FLC 91-824 to be what is just and equitable having regard to s 79(1), (2), (4) and (8) but, that aside, this means that property settlement claims falling within s 79(8) take precedence over testamentary dispositions – in other words, the assets to which the estate is entitled are those that are assessed as being the deceased spouse’s entitlement in proceedings pursuant to s 79, which includes the power to make, for the benefit of a child of the marriage, such settlement or transfer of property as the court determines.
Here there are a number of considerations relevant to an order settling upon the children the estate’s 67.5% share of the O property which, as discussed earlier, are supported at the least by s 75(2)(o):
·The property is the home where both children were born and where they have lived all their lives.
·It is apparent from the evidence that G, at least, is desperately keen to see that the property is not sold but retained within the family.
·To remove the children from their home, without compulsion for sale, would very likely destabilise them [if G’s correspondence directed to the executors is any indicator] for no good reason.
·There is no compelling need for the children to be deprived of the use and enjoyment of the property over the years between now and attaining the age of 25 years by selling it now because there is an alternative.
·Their mother can continue to run the property competently, as she apparently does, and so provide for herself and for them until they take their interest at the age of 25 years. At that point they can decide, as a family of three adults each with their own proportionate ownership, what is to happen to the O property.
·Their mother, who is their sole guardian with sole parental responsibility for their upbringing, can be relied upon to be cognisant of their needs and to act in their best interests. As she is in that singular position, it can be accepted that her application to hold their interest in the O property in trust does not fall into the circumstances considered by the Full Court in Spellson v Spellson and Others (1989) FLC 92-046 [Murray, Lindenmayer and Walsh JJ] where the adult child for whose benefit the application was made did not support it, thereby leading to the dismissal of the application as frivolous, vexatious or an abuse of the court’s process.
·Finally, it is apparent that their father envisaged the O property being retained for their benefit, whatever the terms of his Will. In her evidence Mrs Wylder relates [paragraph 85] a statement from the children’s father to the effect of the O property being run and maintained ‘for the kids’. She relates another conversation with him in November 2004 to the effect that if something should happen to him ‘the property would be maintained for the children until they reach the age of 25. Hopefully by this time they will be mature enough to make the right decision.’ Also [parargrah 30] Mrs Wylder refers to another conversation about building up off farm assets for retirement ‘and so enable the farm to be passed to one of my children, and still allow for sufficient assets for the other child upon [the mother’s] and my death’.
As it happens, it is impossible for the executors and the wife to run the property over the coming years. But the children can receive the benefit of their share of the O property through an order made pursuant to s 79(1), upon the same trusts as those created by the Will and with their mother appointed trustee. Only in that way can a sale be avoided and the O property retained, thereby providing for the children options about the use and retention of the O property to abide the time when they are in a position to make those decisions conjointly with their mother. In my opinion, that is the just and equitable outcome in this case.
Reconsideration of spouse entitlements
It may be thought that the operation of s 79(1) to confer property on children precedes consideration of the parent/spouse respective property entitlements rather than at the stage of considering what is just and equitable and formulating orders. In that event, the situation here can be seen as follows:
(a)The property to be settled on the children pursuant to s 79(1) is worth $2,366,675 [which I have rounded to 67.5% of O property’s value]. Deducting that from the net assets of $4,099,477 leaves remaining assets worth $1,732,802 to be distributed between the wife and the estate.
(b)Plainly the orders proposed would give to the estate $93,011 or approximately 5.4% of the remaining assets whereas the wife would receive $1,639,790 or 94.6%. This is a large differential but the bulk of the value of the O property has been removed from the scales and, in my assessment, the lesser value of the pool of assets would significantly elevate the wife’s s75(2) adjustment.
I am satisfied the outcome proposed is just and equitable, whether the property to be settled on the children through trusts controlled by their mother is taken into account and removed from the assets available to the estate and the wife first or whether it is considered at the final stage of reviewing outcome against the obligation to only make orders that are just and equitable.
Form of orders
Accordingly, the orders will provide for -
·the children’s 67.5% share of the O property to be held by their mother on the same trusts created by their father’s Will, to be taken as tenants in common in equal share at the age of 25 years;
·the estate to retain the other portion of the estate’s entitlement; namely the joint B Credit Union account and the estate assets totalling $93,011 after payment of the tax and to be responsible for any unpaid legal costs from what the estate retains [subject to any order pursuant to s 117];
·The wife to retain the partnership assets, her own assets and superannuation totalling $506,466 after payment of her tax and to be responsible for any unpaid legal costs from what she retains [subject to any order pursuant to s 117];
·The wife to retain 32.5% of the O property to be held as tenant in common with the trusts created for the children.
The form of orders set out earlier is directed to implementing this outcome but there will be an opportunity provided for input from legal representatives in to the form of order before they issue.
SCHEDULE A
TRUSTEE ACT 1925 (NSW)
14A Duties of trustee in respect of power of investment
This section has effect subject to the instrument (if any) creating the trust.
A trustee must, in exercising a power of investment:
(a) if the trustee’s profession, business or employment is or includes acting as a trustee or investing money on behalf of other persons, exercise the care, diligence and skill that a prudent person engaged in that profession, business or employment would exercise in managing the affairs of other persons, or
(b) if the trustee is not engaged in such a profession, business or employment, exercise the care, diligence and skill that a prudent person would exercise in managing the affairs of other persons.
Note: Some Acts deem investments under the Acts to be investments that satisfy the prudent person test. See, for example, section 39 of the Public Authorities (Financial Arrangements) Act 1987 .
A trustee must exercise a power of investment in accordance with any provision of the instrument (if any) creating the trust that is binding on the trustee and requires the obtaining of any consent or approval with respect to trust investments.
A trustee must, at least once in each year, review the performance (individually and as a whole) of trust investments.
14C Matters to which trustee is to have regard when exercising power of investment
Without limiting the matters that a trustee may take into account when exercising a power of investment, a trustee must, so far as they are appropriate to the circumstances of the trust, if any, have regard to the following matters:
(a) the purposes of the trust and the needs and circumstances of the beneficiaries,
(b) the desirability of diversifying trust investments,(c) the nature of, and the risk associated with, existing trust investments and other trust property,
(d) the need to maintain the real value of the capital or income of the trust,
(e) the risk of capital or income loss or depreciation,
(f) the potential for capital appreciation,
(g) the likely income return and the timing of income return,
(h) the length of the term of the proposed investment,
(i) the probable duration of the trust,(j) the liquidity and marketability of the proposed investment during, and on the determination of, the term of the proposed investment,
(k) the aggregate value of the trust estate,
(l) the effect of the proposed investment in relation to the tax liability of the trust,(m) the likelihood of inflation affecting the value of the proposed investment or other trust property,
(n) the costs (including commissions, fees, charges and duties payable) of making the proposed investment,
(o) the results of a review of existing trust investments in accordance with section 14A (4).
A trustee may, having regard to the size and nature of the trust, do either or both of the following:
(a) obtain and consider independent and impartial advice reasonably required for the investment of trust funds or the management of the investment from a person whom the trustee reasonably believes to be competent to give the advice,
(b) pay out of trust funds the reasonable costs of obtaining the advice.
A trustee is to comply with this section unless expressly forbidden by the instrument (if any) creating the trust.
SCHEDULE B
Orders sought on behalf of [the wife]
option 1
That the respondents do all acts and things to transfer to the wife as tenant in common 70% of the [O property].
That the respondents do all acts and things to transfer to the wife:
a)a 15% interest as tenant in common in [the O property] to be held on behalf of [the child A]; and
b)a 15% interest as tenant in common in [the O property] to be held on behalf of [the child G].
That the wife be restrained from mortgaging selling or otherwise dealing with the interest in order 2) pending:
a)the agreement of the respondents (in writing) to such dealing;
b)the child on whose behalf the portion of the said property is held attaining the age of 25 years.
option 2
That the respondents do all acts and things necessary to transfer to themselves as trustees of the estate of the late [husband]:
a)a 15% interest as tenants in common in [the O property] to be held on behalf of [the child A]; and
b)a 15% interest as tenants in common in [the O property] to be held on behalf of [the child G].
That the respondents be restrained from mortgaging selling or otherwise dealing with the interest referred to in the above order pending:
a)the agreement of the applicant wife (in writing) to such dealing;
b)the child on whose behalf the portion of the said property is held attaining the age of 25 years.
Upon adoption of either option 1 or option 2
That the respondents do all acts and things necessary to assign to the wife the livestock, plant and equipment (including motor vehicles) contained in and on [the O property]
That the respondents do all acts and things necessary to assign to the wife all the furniture, furnishings, appliances and items of personalty contained in and on [the O property].
That the wife have exclusive occupation of the [O property] to the exclusion of the respondents and anyone claiming under them.
That the respondents be restrained from entering upon or remaining upon the [O property], except at the invitation of the wife.
[withdrawn]
Declaration that the farming partnership of the husband and the wife was dissolved by the death of the husband on […] May 2005.
Declaration that no partnership exists between the wife and the husband or his estate, or between the wife and the husband’s executors, or between the wife and the respondents.
Order that if any partnership or partnerships exists between the parties or any of them referred to in Paragraphs 9 or 10 above, the partnership or partnerships be dissolved.
That the wife be entitled to carry on the farming business at [the O property] in her own name and on her own sole behalf and be entitled to receive all proceeds of sale or stock and all other receipts and profits of the farming business, and shall pay out of these proceeds and receipts all expenses incurred whilst she carries on the farming business; these expenses include Council rates, Rural Lands Protection Board rates and Crown Lands cadastral road enclosure permit rent.
That the wife retain and be declared the sole legal and beneficial owner of all the farm plant, equipment and stock, to the exclusion of the respondents.
That the wife be released from all obligation, if any, to reimburse or refund to the respondents the sum of $40,713 paid into the […] partnership bank account on or about 14 November 2005.
That the parties and each of them divide into two equal shares any property, investments or other assets presently in the joint names of the wife and the husband (or his executors or estate) and pay and transfer one equal share to the wife and the other equal share to the husband’s estate/the respondents.
That the wife retain and be declared the sole legal and beneficial owner of all her right, title and interest in and to all or any superannuation entitlements that she may have, including those in State Super Fund and BT Personal Super Fund.
That each of the parties be declared the sole legal and beneficial owner of all the personal property in their respective names and possession, to the exclusion of the other party (the furniture, furnishings, appliances, chattels and personalty at [the O property] being deemed to be in the possession of the wife).
That each party be liable for all debts and liabilities encumbering or relating to all assets transferred to or retained by him or her respectively. That each party indemnify the other in respect of these debts and liabilities.
That the respondents must do the acts and things specified in Property Orders 1, 2, 4, 5 and 14 by the 28th day after the date of these orders.
That, if either party refuses or neglects to execute any deed, instrument or writing necessary to give effect to these orders, the Registrar or a Deputy Registrar of the Family Court of Australia Sydney Registry be appointed pursuant to Section 106A of the Family Law Act 1975 to execute the same in the name of that party, and to do all other necessary acts and things to give validity and operation to the deed, instrument or writing.
That the respondents personally pay the wife’s costs of these proceedings.
SCHEDULE C
Orders sought by the Estate [exhibit 3]
That the wife retain those assets of which she now stands possessed, particularly:
All sheep and cattle on the [O property]
All other livestock
All plant machinery & equipment on the [O property]
[B Credit Union] account […]
and there be such alteration of property interests to carry into effect this order.
1(a)The balance of [B Credit Union] account […] to be transferred to the Estate [added in closing address]
That the executors of the estate of the late [husband] (the estate) forthwith attend to the subdivision of the [O property] in the manner described in schedule 7 of the report of [H Company] annexed to the affidavit of [Mr H] sworn 18 May 2007.
That by way of alteration of property interests the estate pay to the wife or as she shall direct the sum of $690,000 within 3 months of the completion of the subdivision referred to in order 1.
That if the subdivision referred to in order 1 leaves a portion containing the [O property] homestead that the estate offer such portion to the wife for lease on commercial terms before leasing or selling that portion to anybody else.
That if the estate and the wife are unable to agree on terms of the lease for [the O property] that the wife vacate [the O property] at the time she receive the sum referred to in order 2.
[Abandoned in closing address]
That the trustees or a nominee agreed on by both of the wife and the estate within 21 days of be at liberty to discuss with the beneficiaries the contents of the will of their father and the effect of these orders on that will.
SCHEDULE D
Orders of 16 May 2006
1.The children referred to in these Orders are [A] born on […] March 1991 and [G] born on […] June 1992.
2.In these Orders "the estate" means the Estate of [the husband], deceased, who died on […] May, 2005.
3.In these Orders “[the O property]” means the property and farm [situate at O and] being the whole of the land comprised in Certificates of Title Folio Identifiers […].
4.In these Orders "livestock" includes cattle, sheep and horses and "stock" includes wool.
5.That the Wife have exclusive occupation of [the O property] to the exclusion of the Respondents and anyone claiming under them.
6.That the Respondents and each of them, their servants and agents, be restrained from entering upon or remaining upon [the O property], except at the invitation of the Wife.
7.That the Respondents and each of them, their servants and agents, be restrained from removing any livestock, stock, plant, equipment and chattels from [the O property].
8.That the Respondents and each of them, their servants and agents, be restrained from carrying on any farming business or any other business on [the O property] or any part of it.
9.That the Respondents and each of them, their servants and agents, be restrained from using [the O property] or any part of it to feed, maintain or graze any livestock.
10.That the Wife shall be entitled to carry on the farming business at [O] in her own name and on her own sole behalf, shall be entitled to sell, dispose of and deal with any livestock and stock in the ordinary course of business and shall be entitled to receive all proceeds of sale of livestock, stock and all other receipts and profits of the farming business. That the Wife shall be entitled to pay out of these proceeds and receipts all expenses incurred whilst she carries on the farming business; these expenses include Council rates, Rural Lands Protection Board rates and Crown Lands cadastral road enclosure permit rent, and to thereafter apply the balance as to 50% to the Wife and the remaining balance to be invested in an interest bearing deposit ("IBD") in an Australian bank.
11.That the Wife shall be entitled to purchase and acquire as sole legal and beneficial owner, further livestock (including cattle, sheep and horses) and to graze, feed, care for and manage them on [the O property]. That the Wife shall be entitled to sell, dispose of and deal with any such livestock and to receive all proceeds of sale of them.
12.That the Wife shall be entitled to pay expenses for the children and family living expenses out of the funds held in the IBD.
13.That the Respondents in writing within 7 days from the date of these Orders (a) withdraw all instructions and requests to Agents not to pay the proceeds of sale of livestock from [the O property] to the Wife, [name], or to pay the proceeds of sale into a trust account or to pay the proceeds of sale to the Respondents or the estate, (b) withdraw the instructions and requests in their letters dated 17 February 2006 to [NSW] Stock Agents, the Australian Livestock and Property Owners Association, Associated Agents [NSW], [NSW] Saleyards Association and all agents who are members of any of these associations and all agents in the regions served by each of these associations, (c) withdraw all instructions and requests to Agents, carriers and others not to transport livestock to or from [the O property], and (d) withdraw all instructions and requests to Agents, carriers and others not to transport livestock for or on behalf af the applicant Wife, [name].
That the Respondents not give such instructions or make such requests or those of a similar nature, again.
In this Order "proceeds of sale" means the whole or any part of the proceeds of sale.14.Liberty to apply granted to either party on 7 days notice as to the implementation or clarification of these orders or any of them.
15.The wife shall do everything necessary to cause Mr [O], Accountant to provide to the trustees the same monthly general ledger he has provided to them since 1 July 2005 for the partnership […] for the farming and grazing business she has run from [the O property] from 1 July 2005 to 23 January 2006 by 31 May 2006, and from 23 January 2006 to 31 May 2006 by 15 June 2006.
And then for each month thereafter by the 15th date of the succeeding month first to be due by 15 July 2006.
Together with a certificate from Mr [O] that the ledger has been reconciled to bank statements.16.The wife shall do everything necessary to provide to the executors of the husband's estate a stock reconciliation for all live stock carried on [the O property] for the following periods, such stock reconciliation by class and age:
1 July 2005 to 23 January 2006: by 31 May 2006
23 January 2006 to 31 May 2006: by 15 June 2006
and thereafter on each date BAS returns are due.
17.The wife shall continue the current insurances for [the O property] and provide certificates of currency for the policies copied in Schedule 1 noting the interest of [the wife], and the estate trustees and beneficiaries of the late [husband] within 7 days of today's date and thereafter as and when such insurances fall due.
18.The wife shall forthwith do everything to
(a)provide copies of statements showing current joint share holdings of the parties within 14 days including shares in [C Holdings]
(b) forthwith do everything to sell these shares.
(c)pay half of the proceeds of that sale net of brokerage to each of herself and the trustees of the estate of [the husband].
(d)provide copies of statements of managed funds in the joint names of the parties including Colonial First State account […] and the BT Future Goals Fund […].
(e)forthwith liquidate such managed funds and pay half of the funds to each of herself and the estate of […].
(f)the trustees shall do everything necessary to facilitate these orders.
19. The parties shall forthwith do everything to sell the property at [A] in the manner set out in Schedule 1 of the wife's application filed 23 January 2006 with […] to act on the sale and by deleting any references to `the husband' and inserting in lieu `the trustees of the husband's estate.'
Upon completion of the sale the parties shall do everything to apply the proceeds of sale as follows:
(a)to make the usual adjustments on sale for council and water rates
(b) to discharge any mortgage thereon
(c)to pay the legal and estate agents costs and disbursements on sale
(d)to divide the net proceeds then left between the wife and the estate of [the husband] equally.
20.The parties are to do anything necessary to ensure that the partnership […] ceases trading including any notifications that need to be made to the Australian Taxation Office.
I certify that the preceding one hundred and nine (109) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Moore
Associate:
Date:
Key Legal Topics
Areas of Law
-
Family Law
-
Equity & Trusts
-
Property Law
Legal Concepts
-
Remedies
-
Fiduciary Duty
-
Costs
-
Jurisdiction
-
Statutory Construction
2
1
1